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How Should Functionally Equivalent Drugs be Reimbursed?

A Retrospective Analysis of Reimbursement for Epoetin-α and Darbepoetin-α in 2001–3 and the Cost Implications for CMS

  • Practical Disease Management
  • Published:
Disease Management and Health Outcomes

Abstract

Statutory reimbursement agencies as well as private insurers throughout member states of the Organization for Economic Cooperation and Development (OECD) reimburse the cost of medicines on the basis of criteria that include robust clinical evidence, budget impact analysis, and incremental cost effectiveness. The Centers for Medicare and Medicaid Services (CMS) in the US are no exception to this rule and are, in principle, seeking to maximize benefit for their Medicare enrollees, whilst ensuring reasonable drug outlays for the small number of drugs that they reimburse. This paper provides a retrospective analysis of the way two functionally equivalent drugs are treated for reimbursement purposes by the CMS; the period under consideration was 2001–3. The two drugs, epoetin-α and darbepoetin-α, are used for the treatment of anemia in renal failure and in patients receiving chemotherapy. By reviewing the publicly available pharmacological and clinical data of epoetin-α and darbepoetin-α, the paper confirms the two drugs’ functional equivalence, despite their structural differences. The implications of dose conversion ratios and costs to Medicare are subsequently explored. It is argued that the issue of dose equivalence between epoetin-α and darbepoetin-α has significant implications for patients, practitioners, and payors. A payor’s perspective is adopted in this respect, whereby clinical evidence and pricing data are used simultaneously. Based on the clinical evidence, a dose conversion ratio for epoetin-α:darbepoetin-α is established, which achieves a comparable clinical effect for the two drugs and this is set to be <254IU:1μg. The incremental costs to Medicare are calculated subsequently. The Average Wholesale Price and the Outpatient Prospective Payment System rule that Medicare uses to reimburse providers are used and suggest that treatment of cancer patients with chemotherapy-related anemia with epoetin-α would save Medicare an estimated $US600 million each year. Patients would also benefit significantly in terms of lower co-payments for epoetin-α. The evidence is supportive of the decision made by the CMS to reimburse the two drugs at the rate reflecting the achievement of comparable clinical effects and therefore reducing the pass-through payments for darbepoetin-α to zero for the 2002–3 fiscal year.

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Notes

  1. Under the Medicare OPPS, drugs eligible for pass-through payments are paid 95% of the AWP, subject to pro-rata reduction.[14]

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Acknowledgments

The authors are grateful to three anonymous referees for helpful comments and suggestions. Panos Kanavos would like to thank Clay Dana Ackerly of the US Food and Drug Administration for providing helpful information and comments. No sources of funding were used to assist in the preparation of this study. The authors have no conflicts of interest that are directly relevant to the content of this study.

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Authors and Affiliations

  1. London School of Economics and Political Science, LSE Health & Social Care, Cowdray House, Houghton Street, London, WC2A 2AE, UK

    Panos G. Kanavos (Lecturer in International Health Policy, Merck Research Fellow in Pharmaceutical Economics)

  2. Division of Health and Social Care Research, King’s College, London, UK

    Ömer R. Saka

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Correspondence to Panos G. Kanavos.

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Kanavos, P.G., Saka, Ö.R. How Should Functionally Equivalent Drugs be Reimbursed?. Dis-Manage-Health-Outcomes 13, 359–370 (2005). https://doi.org/10.2165/00115677-200513060-00002

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